Unilever a Shot at Double-Digit Growth

02/16/2011 12:27 pm EST

Focus: STOCKS

Richard Band

Editor, Profitable Investing

Unilever’s drooping share price is at odds with excellent results and pricing power aplenty, writes Richard Band, editor of Profitable Investing.

In this overextended market, the biggest challenge for investors is finding real bargain stocks to buy. Sure, there are plenty of cheap stocks out there, but I’m talking about real bargains—quality companies selling at low enough prices to deliver a double-digit return in the year ahead.

I could list any number of stocks that should beat a money market account over the balance of 2011. But you aren't looking for a 3% or 4% payback on your investment, and neither am I. If we're going to shoulder the inherent risks in common stocks, we want a reasonable prospect of earning at least 10% in the next 12 months, and preferably a good deal more.

Fact is, Wall Street's rocket ride since last summer has drastically shrunk the universe of stocks that bid fair to meet our profit goals. A broad market pullback in here would be welcome, because it would give us more merchandise to choose from.

Unilever’s Own Private Correction

Meanwhile, we don't have to twiddle our thumbs. Even without a significant marketwide dip in recent weeks, some stocks have already undergone their own private corrections. If you've got spare cash jingling in your pocket, I encourage you to channel a little of it into these outfits.

A prime example is Unilever (NYSE: UL). The Anglo-Dutch maker of consumer staples (shampoo, deodorant, mayonnaise, soups, etc.) posted excellent growth in unit sales of 5.1% during the fourth quarter and 5.8% for the year. Emerging markets grew by double digits in both periods.

In short, Unilever is executing beautifully on its business plan. The stock, on the other hand, has eased back a couple of percentage points from its November high.

Some analysts fret that Unilever won't be able to pass through rising commodity costs into the retail prices of its products. History shows, though, that in the end, clever consumer-goods operators like Unilever always manage to engineer the price increases they need.

Buy Unilever at $30 or less. [Shares closed at $28.89 Tuesday—Editor]

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